Increased Demand for Risk, Solid Retail Sales Drive Aussie 1-Percent Higher

The dollar fell against a basket of currencies to a two-week low, posting losses against all major currencies except the Japanese Yen.  The price action was primarily driven by a stronger Euro which rose as political tensions in Italy eased.

June U.S. Dollar Index futures settled at 93.986, down 0.183 or -0.19%.

The price action in the Forex market indicates investors had a number of influential fundamental factors to choose from on Monday.

With the exception of Dollar/Yen traders, most investors shrugged off Friday’s better-than-forecast U.S. Non-Farm Payrolls report which drove up U.S. Treasury yields. This widened the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a more attractive investment.

The USD/JPY settled at 109.918, up 0.399 or +0.36%.

The Euro was driven higher as Italy made moves to form a new government and as German Chancellor Angela Merkel said over the week-end that Germany favored moves toward a European Monetary Fund.

The EUR/USD settled at 1.1695, up 0.0036 or +0.31%.

The commodity-linked Australian and New Zealand Dollars also posted solid gains. Both rallies were fueled by increased demand for higher risk with the Aussie responding to positive news about company profits and an unexpected rise in retail sales.

The AUD/USD settled at .7648, up 0.0080 or +1.04% and the NZD/USD finished at .7030, up 0.0043 or +0.61%.

Lurking in the shadows on Monday were global trade concerns which re-emerged after China warned the United States against tariffs or other protectionist measures.

U.S. Treasury Markets

U.S. Treasury yields rose on Monday as investors continued to react to Friday’s strong U.S. jobs report. A solid increase in average hourly earnings helped solidify a June Fed rate hike, while increasing the chances of two more rate hikes after that in 2018.

U.S. Economic Data

There was only one report on Monday, new orders for U.S.-made goods fell more than expected in April. According to the Department of Commerce, Factory Orders fell 0.8 percent for April, while data for March was revised upward to 1.7 percent. Traders had forecast orders falling 0.5 percent.


Gold prices settled lower after trading mostly sideways throughout the session. The market was underpinned by trade war concerns, but gains were limited by the rise in U.S. Treasury yields.

August Comex gold settled at $1297.30, down $2.00 or -0.15%.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil settled lower on Monday. Traders continued to price in rising U.S. production and possible global supply growth.

July WTI crude oil futures settled at $64.75, down $1.06 or -1.64% and August Brent crude oil finished at $75.29, down $1.50 or -1.99%.

Technical factors also helped accelerate the price slide with WTI taking out key support levels while triggering a number of sell stop exit orders.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.